Understanding PF Calculation: Is There an Alternative to the Standard 12% on Basic Salary?

Hi, I am working in ITES as an HR professional, and I have a question regarding the calculation of PF. Can anyone tell me if there is any other method for calculating PF besides the standard 12% on the basic salary? Is it correct to calculate PF as 70% of the gross pay multiplied by 12% to determine the PF amount?

Thank you.

Please refer to the contribution rates below:

PF Contribution Rates

PF ➔ 12% of Basic. For any employee receiving a basic salary exceeding ₹6,500, you can cap the PF at ₹780.

Employees:

- Employer: 13.61%
- 3.67% PF Fund
- 8.33% Pension Fund
- 1.10% PF Admin Charges
- 0.50% EDLI
- 0.01% EDLI Admin charge

For any further clarification, feel free to write or discuss.

From your calculation, I can derive that you are considering BASIC as 70% of your gross salary and calculating 12% of the basic as PF, which is absolutely fine. First, you need to fix your basic, which depends on your compensation structure.

For any further clarification, feel free to write or discuss.

Regards

I checked whether it's been followed like that. For one or two, it's correct (70% as basic); for others, they have calculated PF as I mentioned.

I mean here, the basic is not fixed at 70% of gross pay, but PF is calculated as 70% of gross pay * 12%. So, I just want to make sure if it is correct to calculate PF like this.

Hi, PF is always calculated on the basic salary, i.e., 12%. First, fix your basic calculation. I have a doubt about your calculation.

Suppose the voluntary provision of the basic amount exceeds Rs. 6500, and we have to pay the administrative charges on the total wages.

Regards,
Raju

First, you need to restructure your pay structure and set the basic salary at 50% of the gross salary. Calculate 12% of the basic salary for the Provident Fund (PF), and limit PF deductions to Rs 780 for any employee receiving a basic salary exceeding Rs 6500.

Apart from the standard 12% of P.F., we can even deduct up to the full 100% P.F. on the basic salary. The clause for this deduction is that the employee should write to their employer, expressing their willingness to contribute as V.P.F., i.e., voluntary P.F.

Voluntary P.F. Contribution

Voluntary P.F. could be a maximum of Basic & DA, up to the full 100%, but the employer is not obligated to contribute the same amount. The employer's contribution could be either ₹6,500.00 or 12% of the employee's basic salary.

I hope this clears up your doubts.

Regards,